Account-current payment for excise duty is mandatory; Cenvat credit use in breach may attract penalty, though reduced on facts.

Duty under Rule 8(4) of the Central Excise Rules, 2001 had to be discharged through account current on a consignment-wise basis; payment initially made through Cenvat credit was treated as an improper mode, but the later payment from account current was accepted and the earlier credit debit was regarded as available for utilisation. Removal of excisable goods without such account-current payment was treated as a contravention attracting penalty under Rule 25(a), although the penalty was reduced on the facts.

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Issues: (i) Whether the duty liability had to be discharged from account current under Rule 8(4) of the Central Excise Rules, 2001, and the effect of the assessee's earlier payment through Cenvat credit; (ii) Whether penalty was exigible under Rule 25(a) of the Central Excise Rules, 2001, and if so, to what extent.

Issue (i): Whether the duty liability had to be discharged from account current under Rule 8(4) of the Central Excise Rules, 2001, and the effect of the assessee's earlier payment through Cenvat credit.

Analysis: The duty was directed to be paid consignment-wise by debit in account current. The assessee initially paid through the Cenvat credit account instead of the PLA/account current, but later made payment out of account current. The earlier debit from Cenvat credit was therefore treated as available for utilisation, and the payment through PLA was confirmed.

Conclusion: The duty was required to be paid from account current, and the assessee's later payment through PLA/account current was accepted.

Issue (ii): Whether penalty was exigible under Rule 25(a) of the Central Excise Rules, 2001, and if so, to what extent.

Analysis: Removal of excisable goods without payment out of account current was held to be a contravention attracting Rule 25(a). The earlier debarment from the fortnightly payment facility did not eliminate the liability to penalty. However, in the circumstances, a reduced penalty was considered appropriate.

Conclusion: Penalty was upheld in principle but reduced to Rs. 25,000.

Final Conclusion: The order sustained the duty payment requirement from account current and maintained penalty liability, while granting relief by substantially reducing the penalty.

Ratio Decidendi: Where duty is required to be discharged from account current under the applicable excise rules, payment through Cenvat credit in contravention of that direction constitutes a punishable breach, though the quantum of penalty may be moderated on the facts.

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